With 851 listings raising $186.6bn globally in the first nine months of 2014 (Q3’14 YtD), we are 94 percent ahead in terms of capital raised compared to the same period in 2013 and 49 percent by number of deals.
Global IPO trends report for Q3 2014 by E&Y shows that financial sponsors-backed listings (PE and VC-backed IPOs) are a major driver, accounting for 31 percent of the number of global IPOs and 56 percent of the proceeds. In fact, 2014 is a record year for PE-backed IPOs, with the first nine months of 2014 surpassing 2013 totals by capital raised.
This would still have been a standout year even without the impact of the Alibaba Group Holding Limited listing, which contributed $25bn (37 percent) to the quarter’s total proceeds and 13 percent of total proceeds for 2014 year-to-date.
The analysts believe that Alibaba’s strong first-day performance will continue to buoy investor confidence in IPOs through to the end of the year and encourage more companies to consider cross-border listings.
Of course, the end of the third quarter traditionally marks the turning point after the summer slowdown and this year is no exception. After a quiet August, September saw an 128 percent uplift in value (excluding the Alibaba listing) and a 39 percent increase in volume of IPOs globally, taking the totals for the quarter to 260 deals and US$67.1bn in capital raised. On this basis, we can look forward to a strong Q4’14 and the best year for IPO activity since 2010.
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African exchanges have seen a spike in interest in 2014. Year-to-date, there have been 12 IPOs, up from nine in the same period in 2013 and proceeds have seen a 258 percent increase to $0.7bn.
In July, Alexander Forbes Group raised $348m on the Johannesburg Stock Exchange (JSE) in the second largest African listing in 2014 after Nigeria’s Seplat Petroleum Development Company raised $538m in a dual listing on the London Main market and Nigerian Stock Exchange in April.
With the JSE All Share Index reaching record highs this year, pension funds and PE exits lifting IPO activity, and rule changes driving fresh interest, market sentiment has proved consistently positive.
“Improving market conditions are driving activity. A number of factors are currently combining to drive significant IPO activity. Inflation and interest rates remain at historic lows globally and — in many geographies — stock markets continue to rise. The combination of good corporate earnings growth and a lack of alternative investment options means that risk appetite is focused on equities — and IPOs in particular.
“According to our analysis, in the first three quarters of 2014, global IPOs1 have delivered on average a 19.5 percent year-to-date return globally, out-performing market indices by around 14.7 percent. For now, innovation remains the key route to value. As markets stabilise, we are seeing a wave of innovation-led IPOs in the energy, health care and technology sectors,” E&Y stated.
As more capital comes into the system, Q3’14 is seeing the return of multi-tracking as part of companies’ capital-raising strategies. M&A activity for the first nine months of 2014 has become more robust, in terms of deal ranges, sectors and geographies. “We expect the use of global PE buyout dry powder ($463bn) which is at the highest level since 2008, to continue to fuel this momentum,” E&Y said.
Iheanyi Nwachukwu
